The most famous reversal pattern. Three peaks marking the limit of a trend, the neckline, how to measure the target, and the trap of the 'too-clean' head and shoulders.
The head and shoulders is the classic reversal pattern appearing at the top of an uptrend. Three peaks — left shoulder, head (the highest), right shoulder — line up, and a break below the "neckline" connecting their troughs signals a turn to the downside.
The inverted form ("inverse head and shoulders" / head and shoulders bottom) signals a reversal at the bottom of a downtrend.
This pattern is famous for a reason: it is the most visually obvious expression of Dow Theory's "breakdown in the structure of highs and lows". And precisely because it is so famous, fakeouts targeting "shapes that look like a clean head and shoulders" are common. This article covers both the structure and the trap.
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